Apple's China Syndrome

Written by: Chris Ciaccia01/03/13 - 10:58 AM EST

Tickers in this article:
AAPL CHA CHL CHU

NEW YORK ( TheStreet) --
Apple (AAPL) and CEO Tim Cook have made no bones about it: China is going to be one of Apple's most important markets in the coming years. However, the tech giant doesn't have an agreement with China Mobile (CHL) yet. Some on Wall Street think this is about to change sooner rather than later.

Evercore Partners analyst Rob Cihra said he believes China Mobile will eventually need to come to the table with Apple, as it's losing market share for the most important clients, ones who use data plans, or 3G customers.

"We think China Mobile could be starting to 'need' the iPhone more, since it has seen its 3G market share erode by -7 percent to 37 percent since 2011 vs. China Telecom+Unicom having gained +7 percent to 63 percent," Cihra wrote in his note.

Smaller telecoms like China Telecom (CHA) and China Unicom (CHU) have been benefiting at the expense of China Mobile, as these two carriers now have the iPhone 5 , whereas China Mobile, with its more than 600 million subscribers, doesn't.

"We believe the surprising MoM decline in China Mobile's 3G net adds in November is due to the popularity of the CNY20 entry 3G plans with usage rebates offered by China Unicom and China Telecom," Poon wrote in his note.

If China Mobile continues to cede market share in the lucrative market of 3G, perhaps it will be forced to tango with Apple, which it has not done so as of yet.

Cihra estimated that China Mobile has 82 million 3G subscribers, not much more than China Unicom (73 million) and China Telecom (66 million). Where the stark difference lies with the three telecom providers is the percentage of 3G users, with China Unicom having 31% of its users using 3G speeds, and an astounding 42% for China Telecom. Just 12% of China Mobile users have access to 3G capabilities.

The iPhone 5 became available in China on Dec. 14, to exceptionally strong reaction, with Apple announcing it sold 2 million iPhone 5s in its first weekend in the country.

In the press release, Cook again reiterated how important China is to Apple. "China is a very important market for us and customers there cannot wait to get their hands on Apple products," Cook was quoted as saying.

On the most recent earnings call, Cook noted fourth-quarter Chinese revenue was up 26% year over year to $5.7 billion. The iPhone 5 had officially not been granted network access yet. Striking a deal with China Mobile will be an important part of growing that pie.